The number of people desperately struggling with payday loan debts has almost reached record levels for the year, a debt advice charity has said.

The Consumer Credit Counselling Service has been approached by 16,500 people with problems linked to payday loan debt - more than 2,000 of them struggling with five of these loans or more.

With Christmas still to come, that is already near the 17,500 clients it spoke to last year, and well past the 6,500 figure for 2009.

These loans are intended as a short-term stop gap to tide people over for a few days or weeks until payday, but the charity said 173 people it has seen this year have 10 or more of them, suggesting they lead to spiraling debts.

Stressed: The typical amount owed has increased by almost a quarter in the three years, to £1,458

The typical amount owed on them has
increased by almost a quarter in the last three years to reach £1,458 -
roughly equal to the average monthly income for a CCCS client.

The charity fears the figures could
climb higher still as hikes in fuel bills and food costs push more
households towards seeking out 'crocodile help'.

Peter Tutton, the advice service's
head of policy, said: 'We would expect payday lenders to tell people
there are better options rather than feeding into that and offering
crocodile help.

Short-term lenders announced improved
codes of practice in July which included commitments to stepping up
transparency and carrying out affordability assessments to make sure
people can pay back loans.

The charter was agreed by four trade
associations representing more than 90 per cent of the payday and
short-term loan industry and members must abide by the code or
ultimately face expulsion. But consumer groups said the code was largely
a rebrand of rules that have already been flouted and stricter action
should follow if big improvements are not seen.

Back in the spotlight: Payday lender Wonga recently signed a four-year sponsorship deal with Newcastle United

Firms have come under fire for giving
people loans which turn out to be unaffordable, rolling over loans and
charging annual interest rates running to several thousand per cent. The
sector was back in the spotlight this month when payday lender Wonga
signed a four-year sponsorship deal with Newcastle United, a decision
which was condemned by civic leaders and MPs and drew a mixed reaction
from fans.

However, payday lenders have argued
that they want to maintain high standards and the industry generally has
been unfairly tarnished by a few rogue operators. They say most
customers are satisfied they are getting good value for money.

CASH-FOR-ACCESS CONTROVERSY

Wonga paid £1,500 per head for tickets to meet Government ministers at a ‘speed dating’ event.

Representatives of Wonga.com – accused of operating as ‘legal loan sharks’ and preying on those in financial difficulty – are said to have enjoyed ‘cosy meetings’ with ministers.

The event, during the Conservative party conference in Birmingham, saw eight firms sit at a table with a minister for 20 minutes before moving on to the next table where another minister was seated.

It is understood that Michael Fallon, the enterprise minister, David Gauke, the Treasury’s exchequer secretary, and Sajid Javid, its economic secretary, were at the meeting.

Last night there was criticism of the decision to allow Wonga.com, which charges annual interest rates of up to 4,200 per cent, to buy access to ministers at a time when it is facing a major investigation into its activities by the Office of Fair Trading.

Labour MP Stella Creasy said the debate over payday loans should be transparent.

‘Cosy chats with a minister at conference are bad,' she said. 'Public debate about the issues is good.’

Wonga gives loans of up to £1,000 to customers after only 15 minutes. The average amount is £255.

Russell Hamblin-Boone, chief executive
of the Consumer Finance Association, one of the trade bodies which
agreed to the code, said the CCCS's figures only tell 'part of the
story'.

'CFA members adhere to the good
practice customer charter and the industry's own codes of practice,
which helps to set them apart from disreputable lenders by preventing
debts building up and using affordability checks before approving
loans,' he said.

'We limit the number of times a loan
can be rolled over to three, and most people who are allowed to extend
their loan do so no more than twice.'

The Office of Fair Trading (OFT) is carrying out a compliance review into payday lenders.

An OFT spokesman said: 'The majority
of visits to payday lenders in the UK and abroad have been completed. We
are currently analysing data from these visits and from our consumer
surveys and responses from stakeholders.

'We have also completed a sweep of the
advertising practices of payday lenders. We expect to publish our
findings at the end of the year.'

There are around 200 payday lenders operating in the UK and its review looks at more than 50 of the main players.

The Government has already outlined
plans to clamp down on the industry. In July, it announced that the OFT
is to be given new powers to stop rogue money lenders and debt
collectors in their tracks by instantly suspending their licences.

The Government believes the new powers
will ensure that the OFT remains effective, before the handling of
credit regulation passes to the new Financial Conduct Authority (FCA) in
2014.

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